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Friday, May 28, 2010

Papers Estimate How Much Goldman May Pay

News summary by MFWire's editors

The effort by Goldman Sachs to settle charges brought by the Securities and Exchange Commission are gaining attention as the clock for Goldman to take action winds down. Goldman has 60 days from April 16 -- the date the SEC filed its action -- to either file a settlement or a defense. If the two sides do not settle, stock analysts tell the Financial Times and Wall Street Journal that the case could end up in front of a jury.

Both papers suggest that Goldman is seeking a settlement rather than risk a conviction for fraud. That willingness to settle could add leverage to the SEC in the negotiations. The case involves the sale of Abacus CDOs made by a Goldman arm separate from Goldman Sachs Asset Management. However, a fraud charge could hurt the GSAM business and complicate its investment advisory registrations.

Stock analysts peg a possible settlement amount anywhere from $250 million to more than $1 billion, according to the WSJ. The SEC may ask Goldman to redeem $371 million in lost value to investors in the securities at the heart of the case also.

Meanwhile, the FT reports that the SEC could be reluctant to quickly settle such a high-profile case by agreeing to a lesser charge.

If the case goes to court, Goldman is likely to seek a jury trial, according to the paper. That route would also allow Goldman access to witness testimony gathered by the SEC.

The strength of the SEC's case is also an open question. In a vote on whether to file the action, the SEC's four independent commissioners vote split 2-2 and the deciding vote was cast by SEC Chairman Mary Shapiro. A former commissioner told the MFWire.com that a split vote is rare and that typically the Chairman has a strong sense of how the vote would break down before it is called for.

Both Republican members of the commission voted against bringing the charges. 

Edited by: Sean Hanna, Editor in Chief

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